Payday Loan Pitfalls
Need fast cash? Can’t wait until payday?
Perhaps that should read; Need fast cash? Can’t wait until payday? Borrow money for only 500% interest. (Payday Loan Fees can run between 390 to over 780% APR depending on the lender) To put it in perspective a Credit Card issuer typically will charge between 10 to 25% APR.
As we’ve mentioned in previous posts, there are more payday lending offices in the United States than there are McDonalds restaurants. And it is no wonder as to why. The payday lending business carries low overhead that yields high returns.
In fact there are several states that have either passed or are looking to pass legislation to regulate the stiff fees charged for these short term loans. The following states have made payday lending illegal.
- Arkansas
- Connecticut
- Georgia
- Maine
- Maryland
- Massachusetts
- New Hampshire
- New Jersey
- New York
- North Carolina
- Ohio
- Oregon
- Pennsylvania
- Vermont
- West Virginia
While the Payday Lending practice has come under scrutiny for charging high interest rates, another black eye on the industry comes from the perceived exploitation of individuals with financial hardships.
We recommend that you avoid using payday loans as a short term solution to your financial needs because there is a proven propensity for recurring borrowing. Studies have shown that a high number of borrowers continue the borrowing cycle due to being placed in a further deficit by borrowing the money initially and not being able to recoup enough money to comfortably pay the initial loan off.
Start your own emergency savings account. Put as little as $10.00 per paycheck in it and borrow against it only when needed. This will help you resist the short term temptation of easy albeit expensive short term cash. You can then repay the savings account on your own and avoid paying any interest fees.
If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please call us at your convenience. As always, we are here to help and look forward to hearing from you.
1-877-OUT-DEBT (688-3328)
Debt Reduction Services and the National Financial Education Center
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Rick has worked in the Consumer Credit Counseling industry for nearly 10 years and has spent over 7 years working for Debt Reduction Services as their Marketing Manager.